LOURIE CONSULTANTS

Volume 3, Number 1

A newsletter published for clients and friends of Lourie Consultants.

EVALUATING PROJECT DELIVERY SYSTEMS

In increasing numbers, public and private owners are seeking alternatives to the traditional approach to project delivery. The traditional approach provides for the owner to select and contract for design services. There is a separate contract for construction services. While allowing the design professional to maintain independent professional judgment, the traditional approach, nonetheless, includes a separate contract for design services.

What is driving this search for alternative project delivery systems? Quite simply, project owners are seeking more cost-effective solutions, higher quality products and services, shorter project schedules, and fewer legal entanglements on their projects. Project owners also want design firms that give more attention to project constructability. Various methods have been developed in recent years to assist in team building and risk sharing to ease delivery of projects. The most popular alternatives to traditional project systems are outlined below.

Design-Build Delivery Systems

In a Design-Build delivery system, the owner retains a single entity that provides both the design and construction services for the project. The Design-Build Contractor becomes the single point of responsibility for the project. The Design-Build contractor is a vendor to the owner. The subcontractors to the Design-Build contractor are in the same vendor relationship with the owner. Theoretically, Design-Build provides for lower total project costs based on more rapid delivery time and the ability of the architect/engineer (A/E) and contractor to work towards containing costs. Design-Build can foster innovative design solutions as the A/E and contractor pursue a common goal within the design-build process. Value engineering is an implicit part of the process.

A thorough project description is needed before selecting a Design-Build contractor. The project description must include performance specifications in the scope of work package, particularly for projects involving building or systems construction. Considerable effort and expense goes into producing a Design-Build Request for Proposal (RFP) package. Inherently however, there are differences in cultures between engineering firms and contractors which could result in problems in delivery of the project.

A major disadvantage to Design-Build is that only certain types of projects are suited for Design-Build. Ideal building projects are those that can be well defined by the user organization during the bidding and negotiations stage. However, Design-Build should not be used to obtain low-cost professional design services nor should it be used to limit the involvement of design professionals. Numerous public and private owners have found that quality design services and adequate workscopes lead to significantly lower construction and life-cycle costs. Projects such as full-services remediation do not work well as Design-Build. These projects have workscopes which include investigations and studies to define the extent of contamination and are therefore difficult to bid and execute as Design-Build.

Federal government agencies increasingly use Design-Build delivery systems. The General Services Administration (GSA), U.S. Postal Service (USPS), and the State Department are making significant use of Design-Build as a project delivery system. At the USPS, Design-Build delivery systems accounted for 19 percent of procurement in 1992. The Environmental Protection Agency (EPA) contracts nearly all of its work using nontraditional project delivery systems.

Construction Management

Construction management (CM) is defined as maximizing an owner's capital investment through the coordinated efforts of the designer, owner, and construction contractors working together to preserve and enhance the quality of the project, control construction costs and time, and to reduce long-term operating and maintenance costs. The construction management program objectives are achieved by exercising good management practices.

Selecting a construction manager's services is done using a qualifications-based selection (QBS) approach just as one would select a design professional for conceptual and detailed services. This selection method helps provide a good match between the owner's needs and the CM's capabilities, skills, and experience. Construction Management is useful particularly when the owner does not have experience with construction and wants to hire an expert to represent the owner's interest. The CM can bring the entire project team together during the design phase to develop the most cost-efficient project meeting the client's needs. One disadvantage to CM as a project delivery system is final costs are not guaranteed unless the CM agrees to a guaranteed maximum price after the schematic design documents are available. As the owner assumes the responsibility of selecting the CM, the project can suffer if the owner selects the wrong CM for the job. Under many public statutes, the CM is precluded from performing work with its own forces.

Agency Construction Management and independent contractor CM have been used successfully for many years for projects involving building construction. Many owners prefer these project delivery systems to advance projects rapidly from conceptual design to finished, constructed product. Full-service environmental design firms are increasingly undertaking the CM's role in remediation projects. The trend toward full-service remediation is driven by environmental remediation projects which are complex and generally not understood by the owners. These projects also need professional services throughout the project to alter the design to conform to actual conditions encountered during construction. Generally, remediation projects also require detailed documentation of field activities and interaction with regulatory agencies which can be provided by the CM. Construction management can be an important project delivery system to complete environmental remediation projects cost effectively and on time.

Privatization

Privatization is a variety of techniques and activities to promote more involvement of the private sector in providing traditional government or public services. Privatization is not one or a limited set of techniques but is a number of management techniques to affect delivery of a project. Some advantages of privatization include capital cost savings to the public, shorter implementation time, and the ability to procure services or projects otherwise unavailable in the public sector. Constraints to privatization include the need for legislation to allow privatization and political opposition to the privatization concept. Another constraint is the potential for labor problems from public employees unions, and from public employees themselves if public sector jobs are eliminated as a result of privatization.

Partnering

Partnering is not a project delivery system, but is a way to conduct business among the team members. In the partnering approach, the owner, contractor, and design professional develop an agreement before construction based on the mutual trust among the parties. Generally, the partnering agreement is the culmination of a preconstruction workshop led by an independent facilitator. Key elements of partnering include Commitment, Equity, Trust, Mutual Goals Development, Timely Responsiveness, Implementation, and Continuous Evaluation. Private-sector partnering and public-sector partnering can have different aspects. In the private-sector arrangement, long-term relationships can be established among the owner, A/E, and/or construction firm. In the public sector, the partnering arrangement generally begins after the award of the contract, and includes the owner, design professionals, and contractor. Both the public and private sectors partnering agreements have the common thread of increased productivity, cost-effectiveness, and continuous quality improvement of services and products.